All posts tagged IAG

Severe cold weather has hit much of western and northern Europe, affecting flight schedules Monday. Analysts have an eye on the sector, albeit for very different reasons.

Credit Suisse upgraded International Consolidated Airlines to “outperform” from “neutral” as it expects progress in Spain, with or without union agreement. It says that if Iberia management can negotiate a satisfactory deal with labor unions, or unilaterally reduce headcount, it could limit the company’s 2013 operating loss to around €100 million.

Analysts at Citigroup have a different opinion, however, downgrading the stock to “neutral” from “buy” on concerns about Iberia.

International Consolidated Airlines Group’s drastic cuts at its Iberia unit highlights just how difficult it is for flag carriers to compete with low cost carriers. IAG’s plans to cut 4,500 jobs, downsize its fleet by 25 aircraft and reduce capacity by 25% at its Spanish operations comes on top of swingeing job cuts announced at Deutsche Lufthansa AG and Air France-KLM.

Rising fuel costs and slack growth in much of Europe are problems for most European airlines but this is compounded by unionized workforces that inflate non-fuel costs making it well nigh impossible for them to compete on cost with low cost airlines.

The collapse of several regional airlines such as Hungary’s Malev, Spanair and Danish airline Cimber Sterling Group has added to the overall cut in capacity, boosting the success of no-frills airlines such as Ryanair even more.

“IAG is in survival mode and these aggressive cuts represent a very significant capacity reduction,” said Gert Zonneveld, analyst at Panmure Gordon.